Asian bourses traded positively in response to the continued dovish tone from the Federal Reserve and beat on earnings amongst the technology giants, including Apple, Facebook, eBay and Qualcomm. In addition, the investor’s focus was also on President Joe Biden’s first address to a joint session of Congress where he stated America is on the move again and that the American Jobs Plan is a blue-collar blueprint to build America. It caused an instant risk-on flow to US equity futures to push the e-mini S&P 500 to a record high. Market participants will now be paying attention to see how the plan will develop among the Democrats and Republicans. It could give more fuel to the Reflation Trade theme, which would push US rates and commodities prices higher in the short term due to a market repricing of inflation expectations. However, gains for Asia bourses were tempered amid a large slate of corporate earnings and with Japanese traders away due to holiday closure. Investors will be looking for clues to see if Asian corporate reporting will maintain the theme of a prolonged economic and corporate profits growth or if it is already starting to peak from here. Hang Seng and Shanghai Composite also traded higher with the risk-on sentiment from the US equities encouraged and by earnings releases including China’s largest oil company Sinopec and big four China Construction Bank.
In Wall Street, the play in stocks was more mixed amid the slew of significant tech earnings, with eBay (EBAY) suffering after guidance, Facebook (FB) surging on big beats. Companies continue to cite inflationary pressures and supply chain bottlenecks, particularly in the semiconductor space, where Ford cut its guidance due to the shortage. Elsewhere, today’s macro data from the US was mixed, with a hefty 6.4% rise in Advanced Q1 GDP confirmed, but did miss some analyst estimates. In contrast, US Initial Jobless Claims data was slightly higher than expected, although there was a muted market reaction at the time. Participants now look to Friday’s Personal Consumption Expenditures Price Index data, energy sector earnings schedule, and remaining month-end flows. Some stock selling is expected due to portfolio rebalancing, bond buying, and some dollar selling against the majors’ and EMFX pairs. Worth keeping an eye on the US treasuries yields and US break even inflation rates. Assuming the rate complex trades sideways or with soft price action, that could support broader US dollar selling on the last day of the month.
